Italy's president confident gov't crisis avoided

Although Italy's Silvio Berlusconi resigned in disgrace a year ago, has since been convicted of tax fraud and now faces plunging poll numbers, the media baron is showing he still has the power to put pressure on his successor, Premier Mario Monti.

With Europe still deep in its debt crisis, it doesn't take much to make the markets nervous. That's what happened Thursday when the 76-year-old Berlusconi withdrew his party's support for Monti's government, threatening a premature end to its ambitious reform program.

Berlusconi's power play also unnerved Italy's president, Giorgio Napolitano, who had tapped Monti to take over as premier last year after markets lost confidence in Berlusconi's ability to push through the needed reforms.

Napolitano met Friday with Berlusconi's top political aide and hand-picked heir, Angelino Alfano, who assured him that the party would work toward an "ordered conclusion of the legislature," a statement from Napolitano's office said.

Napolitano later met with the leaders of the other major political parties and said he was confident that a "constructive and correct institutional path is possible, in the interest of the country and its international image."

Economists for Unicredit, Italy's largest bank, say Berlusconi's decision was "significant and tends to confirm that the next few months will be bumpy" for Monti, with the possibility now looming of an early election before the expected date in March.

"The fact that the electoral campaign moves into top gear certainly increases the political uncertainty," said Chiara Corsa and Loredana Federico in their analysis.

The Italian economy, the third-largest of the 17 European Union countries that use the euro, is in recession as the government enacts tough measures to get a handle on its debts. Italy has the second-highest debt level as a percentage of its GDP in the eurozone - at 126 percent. Only Greece's debt is higher with 150 percent.

Monti's government of unelected technocrats won both confidence votes by a wide margin Thursday, but the vote signaled dangers ahead for the technocratic premier.

With opinion polls showing that the main center-left party, which supports Monti, in line to win an election, the conservative Berlusconi appears to be distancing himself to capitalize on discontent over new taxes and rising unemployment. He has complained that Monti's policies have put Italy into a "spiral of recession."

Berlusconi, three times premier, has hinted that he will run again and Alfano made clear that was a real possibility, saying Berlusconi "has the right to defend his title."

Berlusconi claims his allies are pressing him to seek election again, hoping that Monti's painful austerity measures will win votes for the center-right.

Still polls say Berlusconi's party would drop to less than 15 percent of the next vote.

"He can't see himself leaving the stage," said Giovanni Orsina, a political science professor at Rome's LUISS university and author of "The Right After Berlusconi."

"He actually believes he is the best, that he can't be substituted," said Orsina.

But Orsina and others say Berlusconi's legal woes also play a role.

The government has drafted legislation making candidates who have been convicted of crimes ineligible to run for office.

Berlusconi is now appealing an October conviction for tax fraud for which he received a sentence of four years in prison. He is also standing trial on charges of having sex with an underage woman and using his office to cover it up with a verdict expected early next year. He has denied the charges.

Alfano insists the media mogul's party had no intention of sparking a crisis that could bring down the government.

`'We didn't vote `no' on the confidence votes," Alfano said Friday, explaining the party's abstention. He had earlier described the abstentions as a `'clear signal" that Berlusconi's center-right forces `'don't like the way the economy is going."

What he didn't acknowledge was that for the first time Berlusconi suffered several defections from faithful allies, including former Foreign Minister Franco Frattini.

The Monti government has several major legislative targets before his term ends, including passage of the budget, a law requiring a balanced budget and the abolition of a number of provinces to cut costs.

Monti's own political future is uncertain. He has sent out signals he would be available for another stint in the event no coalition succeeds in putting together a majority. He has also been mentioned as a possible successor to Napolitano, although the position of president is largely ceremonial.